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Strategies To Grow Your Wealth During The 2020 Financial Crisis

Strategies To Grow Your Wealth During The 2020 Financial Crisis

| June 06, 2020
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We are now multiple months into our lives being turned upside down. And even though some states and counties are reopening, we have a long way to go to normal. As a result of the coronavirus crisis, we’ve seen increased volatility, drastic market lows, and rising unemployment numbers. As a result, many people are struggling financially or worried about their money. 

Here’s the good news: you can be proactive about your finances and make the most of this time. Let’s look at 5 strategies you can use today to leverage the 2020 financial crisis and grow your wealth. 

1. Reevaluate And Reposition Your Finances

A financial crisis is the perfect time to go back to the drawing board and reevaluate your current financial situation. Is your emergency fund too small? Is there more risk in your portfolio than you’re comfortable with? Do you have more debt than you should? 

Take a hard look at your finances to identify ways you could save money—either now or in the long run. For example, now is an ideal time to:

  • Refinance your mortgage to a lower rate. Interest rates have fallen back to a historic low. As of May 20, 2020, the average APR for a 30-year fixed-rate mortgage is 3.39%. (1) If you’re looking to cut your mortgage payment, call your lender and see if you qualify for refinancing. Just be sure to factor in closing costs, which could eat into your savings.
  • Take out a life insurance policy (or increase your current coverage). If you’re like most people, the coronavirus pandemic has you thinking a lot about life insurance. The good news is, it’s not too late to apply and lock in a low rate if you’re healthy. Life insurance rates are largely tied to interest rates and the market, so buying now while rates are low could be a good way to secure your family’s financial future. (2)

2. Keep Investing

Investing probably sounds like the last thing you want to do right now. We get it. But if you really want to grow your wealth, you should consider investing because now could be the perfect time to buy some stocks at a steep discount.

If we look back at the 2008 financial crisis, we see that stocks fell by more than 50%. (3) But the market began to bounce back in 2009. Those who persevered saw their portfolios regain their original value in two years and reach all-time highs in 2019. 

We’ve had 12 bear markets since World War II. (4) And guess what? We recovered from every single one of them. We can’t say when stocks will stop falling. But we do know that if you’re patient and keep on investing, the market should recover again and you will not have missed the benefits of the recovery. 

3. Limit Your Losses

But what if you’re retiring soon and this financial crisis has made you realize you’re too heavily invested in stocks? In this case, it could be a smart move to set up a stop-loss for your investments. A stop-loss sets a bottom price for your securities so that when the price drops to the threshold you’ve set, they’re automatically converted to cash. 

Just make sure you keep in close contact with your financial advisor so you don’t miss the market recovery when it does happen. If you’re retiring soon and are stressed about the market falling, stopping the losses can be a great way to ease your worry. 

4. Minimize Taxes

Growing your wealth doesn’t necessarily mean making more money. One of the most efficient ways to maximize your savings is to minimize your tax burden. Fortunately, there are plenty of strategies you can use to legally reduce your tax bill, such as:

  • Contribute the maximum amount to your tax-advantaged retirement and HSA accounts.
  • Use deductions to reduce your taxable income and credits to reduce your tax bill.
  • Reevaluate your tax filing status to ensure you don’t face unnecessary penalties.
  • Use charitable donations to minimize the financial impacts of required minimum distributions (RMDs).

5. Seek Help From A Financial Professional

If you’re not a financial professional, it can be stressful to figure out how to grow your wealth during the 2020 financial crisis. And considering all that’s going on in our world, you have enough to worry about. In times like these, consider connecting with a trusted financial advisor who can help you create a step-by-step plan for protecting and growing your wealth today. 

Nichols Financial Strategies is a financial advisory firm that’s dedicated to helping you weather any financial storm that comes your way. Whether you need help managing your portfolio, creating a financial plan, or minimizing taxes, we’re here to help. Get started by scheduling a complimentary 60-minute consultation or reaching out to us at 559-440-6999 or by email at matt@nfstrategies.com

About Matt

T. Matthew Nichols is founder, CEO, and wealth advisor at Nichols Financial Strategies with more than 20 years of experience in the financial industry. He spends his days serving business owners and families, specializing in helping those in the agriculture industry proactively prepare for the unique challenges they face in a rapidly changing economy. Matt is an Accredited Investment Fiduciary® (AIF®) and holds his FINRA Series 7 and 63 securities registrations with LPL Financial and his California State Life & Health Insurance license. He’s also pursuing his ChFC designation and is dedicated to continuing his education and staying abreast of the latest financial trends and strategies. Matt’s mission is to help his clients transfer wealth from one generation to the next and work towards achieving their goals so they can spend more time on what they love most. Matt was born and raised in the California Central Valley and resides in Fresno with his wife, Christy, and their two daughters, Holly and Jillian. He enjoys golf, traveling, skiing, and spending quality time with his family. To learn more about Matt, connect with him on LinkedIn.

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(1) https://www.nerdwallet.com/blog/mortgages/current-interest-rates/

(2) https://www.businessinsider.com/personal-finance/life-insurance-during-global-health-crisis

(3) https://www.thebalance.com/stock-market-crash-of-2008-3305535

(4) https://www.cnbc.com/2020/02/27/heres-how-long-stock-market-corrections-last-and-how-bad-they-can-get.html

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